Outcome of legislative challenges and FBI investigation will determine if US President's policy agenda stays on track

If politics were to be graded for their dramatic value, with zero being like a really boring event and 10 akin to a catharsis in a Shakespearean tragedy, then the landmark tax overhaul bill that swept through the Senate a few minutes before 2am last Saturday would probably be rated an eight.

That the Republicans in the Senate were able to pass this controversial legislation, two weeks after the House of Representatives passed its own version, elicited a big "Wow!" in Washington, not to mention the sighs of relief heard at the White House and the Republican leadership offices on Capitol Hill.

Much of that had to do with Washington's game of expectations. To recall, in the aftermath of inauguration day, the expectation in Washington was that - with the Republicans now controlling both the executive and legislative branches of government - they would be headed towards a "yuge" victory when it came to repealing Obamacare, the healthcare insurance programme enacted by Donald Trump's Democratic predecessor, Mr Barack Obama.

But that has not happened despite the fact that the Republicans have held clear majorities in the House and the Senate.

The problem was that the Republican Party was not only split on ideological lines, between free marketers and economic nationalists, or moderates and conservatives, but that an impressive number of Republicans lawmakers, especially in the Senate, just didn't like the new occupant of the White House.

Centrist Republican senators like Mr John McCain and Mr Jeff Flake from Arizona, Ms Susan Collins from Maine, and even a traditional conservative, Mr Bob Corker from Tennessee, were expressing their distaste for President Trump and their opposition to some parts of the White House's policy agenda, making it clear that the Republican President should not take their votes for granted.

Indeed, after the failure by the Republicans to get the legislation to repeal Obamacare or Trumpcare approved, and the difficulties they faced in trying to pass a new budget plan, there have been growing concerns at the White House that Mr Trump's first year in office would end without any legislative achievement.

So as Congress started debating after the summer recess the Republican plan to cut taxes by nearly US$1.5 trillion, some wondered if the Republicans would ever be able to send a tax overhaul plan to President Trump to sign.

The massive tax cuts looked like they would end up violating another Republican principle, the commitment to balance the federal budget. Instead, the tax cuts could help create a massive budget deficit and, by extension, a larger trade deficit.

ANXIETY

So there was a certain level of anxiety at the White House on the eve of the Senate vote.

But although the Senate vote was close, 51 to 49, every Republican except Senator Corker, who is retiring at the end of his current term, voted in favour of the measure.

The expectation now is that a final bill will be signed by Mr Trump before Christmas.

It would mark President Trump's first major legislative triumph.

Most market watchers are predicting now that the passage of the tax bill and, in particular, the reduction of corporate tax rates, coupled with other measures to reduce the regulatory burden on business, are going to usher a super-bull stock market that, coupled with the continuing fall in the unemployment rate and the rise of consumer confidence, are going to produce a sense of economic boom.

That, in turn, would bring Mr Trump and the Republicans a political boom next year, when the mid-term congressional elections take place.

So it was interesting that on Friday, on the eve of the Senate vote which seemed to be on its way to sail through Congress, the stock market took a tumbling. The reason: The announcement that Mr Trump's former national security advisor, Michael Flynn, would plead guilty to lying to the FBI about conversations with the Russian ambassador to the United States last December.

That the retired general Flynn became the first senior White House official to cut a cooperation deal with special counsel Robert Mueller, who is investigating alleged interference by the Russian government in the 2016 presidential election, raised hopes among critics of Mr Trump that Mr Mueller's inquiry would conclude that the Trump campaign, and perhaps even Candidate Trump, had colluded with the Kremlin to deny Mrs Hillary Clinton an electoral victory.

From their perspective, Mr Flynn's decision to aid the investigation rated around nine on the drama scale, suggesting that President Trump would be impeached and forced out of office before his term ends in 2020.

These doom-and-gloom sentiments may have filtered into the financial markets on Friday.

Much of what Mr. Flynn admitted to involved his activity after the election in December 2016, when he was part of the president-elect's transition team and was authorised to reach out to Russian and other foreign officials. He was only charged for lying to an FBI agent about those contacts.

But it is still possible that he and other witnesses would end up implicating Mr Trump or other close campaign aides of collusion with the Russians during the presidential race. The general expectation in Washington, however, is that this wouldn't happen.

Still, the continuing investigation may distract the president and his aides from their policy agenda.

Moreover, it is not clear how the plan to overhaul the tax system and other pro-business measures being promoted by the White House and its Republican allies on Capitol Hill would play in the 2020 presidential elections, especially when it comes to the white blue-collar voters in Pennsylvania, Michigan and Ohio, who had provided candidate Trump with the electoral margin of victory last December.

The tax cuts are not going to improve their personal economic conditions, but the White House is banking on the economic boom it could ignite, and the sense that the country is moving in a nationalist Trumpist direction - factors that would help Mr Trump win their votes again and get re-elected.